UBS downgraded Philip Morris to Sell from Buy with a price target of $86.50, down from $105. The firm’s analysis suggests growth of next generation products, which make up 20% of tobacco industry revenue, is likely to slow over the next five years, largely due to heated tobacco. The analyst expects companies will fall short of their medium-term next generation product targets, which is a key driver of valuations. In this environment, UBS prefers tobacco stocks that will not disappoint on key operating metrics and can return significant cash to shareholders. For Philip Morris, it expects IQOS normalization.
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